Determining True Value in Large-Cap Value Investment: How Can Investors Manage Risk and Avoid Bubbles While Taking Equity Positions for the Long Term?
67 WALL STREET, New York - March 5, 2013 - The Wall Street Transcript has just published its Large Cap Value Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company Portfolio Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.
Topics covered: Value Investing - Long-Term Investing - Bottom-up Investing - Global Investing - High Quality Companies - Investment Strategies - Large Cap Investing
Companies include: Costco Wholesale Corporation (COST), Wal-Mart Stores Inc. (WMT), The Bank of New York Mellon Co (BK), Molson Coors Brewing Company (TAP), Abbott Laboratories (ABT), Hospira Inc. (HSP), Allergan Inc. (AGN) and many more.
In the following excerpt from the Large Cap Value Report, an expert portfolio manager shares his portfolio-construction strategy and his investment philosophy.
TWST: As you said, there is so much information out there, how do you wade through it all?
Mr. Auxier: I think this is where experience is important. Because I have been studying individual businesses going back to 1982, I have a database to filter out the noise. When you have done over 45,000 hours of research on businesses, you narrow the list where you can quantify the risk/reward. With the Auxier Focus Fund, the big advantage is cumulative research, knowledge that comes from owning businesses for a long period of time, studying managements, determining which managements underpromise and overdeliver. Also, it helps to know accounting and to understand the history of bubbles and bubble pricing.
There is a benefit to having managed for tough clients through the 1983 PC bubble, the 1987 crash, the 1990s thrift crisis, the 2000 technology stock meltdown, the 2006 housing crisis and the following credit bust in 2008. You develop a respect for markets and realize humility is necessary to survive. It's not so much looking at quotes on a screen; it's about understanding the business and the cyclicality of investing.
Like Warren Buffett says, you can count on three things in the market: fear, greed and folly. If you are rational and you study history, there are always opportunities to make above-average, risk-adjusted returns. We thank God for human nature. People tend to repeat the same mistakes over and over. Being a business analyst is exciting when you look at something like Costco (COST). We originally bought it back in 1984-1985, and that stock was probably $0.15 to $0.20. A $2,000 investment is now worth over $800,000 today. People don't realize the top 25 U.S. stocks over the past 25 years have returned between 19,000% and 63,000%. You can still do very well with mundane, quality businesses over the long term.
TWST: When you say "quality business," how do you define that? How do you identify a quality business?
For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.
